Argyle Diamonds Business Strategies - Case Study Example

Strategic Change: A Case Study of Argyle Diamonds Strategic Business Plan Introduction Most companies find it impossible to create any kind of sustainable competitive advantage based on product alone. It is common knowledge that every one of the successful companies sought and found a precise understanding of how it could create a customer-centered competitive advantage. Hessan and Whitely (1996) emphasized the idea to take advantage of the competitive situation not just by being better in how that product gets sold, serviced, and marketed at the customer interface. It requires that companies create breakthroughs in how they interact with customers, and design a way of interacting that makes an indelible impression on customers, one that so utterly distinguishes them from others that it becomes a brand in itself. Today's market is characterized by highly competitive organizations which are all vying for consumer's loyalty. Firms are faced with the challenge to maintain their own competitive edge to be able to survive and be successful. Strategies are carefully planned and executed to gain the ultimate goal of all: company growth. However, external factors are not the only elements which influence growth. Today most companies find that it impossible to create any kind of sustainable competitive advantage based on product alone. It is common knowledge that every one of the successful companies sought and found a precise understanding of how it could create a customer-centered competitive advantage. Competition is an important factor to consider before entering a business. Companies should have successful competitive strategies to be able attract, retain and grow customers. However, before the company can plan and execute these strategies, it should be able to pinpoint its sources of competitive advantage which can be differentiated through products, services, channels, people and image (Kotler & Armstrong, 2001). Since the market is in the international orientation, the advertisers should keep in mind the differences that are distinct between and among the target market from different cultural backgrounds which may significantly affect the affectivity of the campaign. The fact is, there may be ideas that will not be applicable across the diverse target market population. Studies on the relationship of consumer behavior and their personal values and cultural orientation as well as their beliefs on certain principles, the dispositions they hold and side they take on political, gender and social problems and issues should be duly accorded. Moreover, other elements, such as understanding the right target audience for a product or service, an indeed, researching such an audience in considerable depth, are equally important. Similarly, even if the appropriate channels are known and understood, the content of the messaging and communications developed for those channels, and that audience, or naturally of critical importance. Such channels for example, will include TV advertising, or an outdoor campaign. Advocates of such channels will argue with justification, that media can now be bought to give a highly articulate degree of one to one targeting, but more importantly the inclusion within messaging across these channels of a telephone number, email address, or website, fulfill our requirement to develop one to one dialogue (Elgar, 2003). Green Technology General Trading and Contracting Co. (GT) is own by a family in Kuwait. This company has been importing and exporting fruits and vegetables for six years now. The companies objectives are : To ensure that a full range of high quality fruits and vegetables are available to consumers all year round in Kuwait and other neighbouring countries. To fulfill all their desired personal goals, such as a good lifestyle, family succession, education and retirement. GT has been producing different varieties of high quality vegetables such as, tomatoes, cheery tomatoes exotic hydroponics grown lettuces, cucumber, carrot and many other varieties for the domestic market. Also, imports fruits such as, apples, oranges, mandarins, strawberries and other varieties from Iran, Lebanon, Gordon and other countries. Green Technology General Trading & Contracting Co. (GT) is a family-owned business that produce, import and export fruits and vegetables in Kuwait. The company started six year ago when Alsaleem and Almuhailan farms combined together with a total growing area of two hectares of climate controlled greenhouses and three hectares areas of filed grown products. However, now it is been operating by Mr. Rayhad Alsaleem and his son's. It is now has a growing area of around 50 hectare in Kuwait, Egypt, Gordon, Saudi Arabia and other countries. The business objectives are: To ensure that a full range of high quality fruits and vegetables are available to consumers all year round in Kuwait and other neighbouring countries. To fulfil all their desired personal goals, such as a good lifestyle, family succession, education and retirement. The business was structured to three major areas, see Figure 1. The farms and warehouses are the places were most of the business operation activities happen. The company has three farms in Kuwait and three warehouses and deals with other farmers from other countries such as, Egypt. The head office is attached to the major warehouse, and that's were the daily business to business operations happens. Business operations are those activities involved in running and managing the day-to-day actions of a business for the purpose of producing value/profit - those activities involved in running/managing the business, such as labor management, storage, testing, technical advice, inputs, outputs, transport, marketing, accounting financing etc. and each division has its own management team and each team has its own goals and objectives to achieve and all will lead to the main objectives mentioned above. More details of the management structure will be discussed in the following major report Organizational levels: Top manager: Company Manager: Mr. Rayhad Alsaleem. Middle Manager: Assistant manager: Mr. Abdullah Alsaleem. First-line Managers: Accounting and Financing Division: Mr. Mohamad Alkooly. Marketing Division: Mr. Fathy Altameerie. Farms Manager: Mr. Mohamad Alhamza. Warehouses and Storage Manager: Rakaan Alanzie. Employees: over 185. Strategic Change Perhaps the space between the new organization design and implementing it into actuality is the whole coverage of organization change and development. People are adaptive to change (Allen, 2006). However, certain skills must be present from the initiators of change so as to successfully implement their project. Thus, managers need to have the necessary abilities not only in detecting what needs to be changed but also how to effectively introduce the change (Arnst and Edmonson, 1994). Companies employ detailed business plans and strategies in order to gain several benefits from its competitors such as increased profits and enhanced customer relations as company objectives. According to Cohen and Moore (2000) balance between enhanced company processes and renewed objectives should be critically appraised in order to ensure the success of the company. Similarly, every business wants to have a regular customer base because customers dictate profits and how the customer is treated will reflect on whether the customers will remain loyal with the company or not. Gaining customer loyalty is also a key corporate challenge today especially in this increasingly competitive and crowded marketplace because of the eventual profitability it will provide (Chow & Holden, 1997). Moreover, it is a management philosophy that seeks to integrate all organizational functions such as marketing, finance, design, engineering, production, customer service, and others to focus on meeting customer needs and organizational objectives (Hashmi, 2000). However, while the company is capable of providing a budget, the outcomes should be able to recover these allocations in order to prevent capital losses. Thus, the company should employ strategies and create objectives that are compatible to the capacity of the company and what it intends to achieve. But the reliance to the internal resources of the organization will not do if environmental considerations of the company are not likewise considered (Bailey and Schultz, 2000). These include the significant market characteristics that directly and indirectly influence and dictate the strategic business implementation and sound decision-making from the options available. The forecast of subsequent political, economic, and social implications that change will result to also needs to be identified and enumerated in order to ensure the success and development of the organization and the welfare of the public in general. SWOT Analysis Indeed, making a business successful in a particular setting demands crucial and detailed studies and examination of the factors that will generate the best results that will serve the aims and objectives of the company (Barber, 1998). In this light, owners of big business organizations operating in a competitive business environment should be in constant look out with its competitors and the overall status and events in the industry (Barton et. Al, 2002, Buchanan, 1972 and Child, 2002). Taking advantage of the opportunities and intensifying the strengths while minimizing the risks and weaknesses of a business firm greatly helps in predicting the success of the business enterprise. Changes Taking Place in the Environmental Factors: A Major Strategy Change SWOT STRENGTHS WEAKNESSES 1. Wide knowledge of retail industry 2. Competent top management and rank & file for operation and maintenance 3. Existing customer base 4. Financial investment backing. 5. Strong profit returns 1. Low supervision on international market OPPORTUNITIES THREATS 1. Expansion of target market 2. Healthy market environment 3. Increasing detraction of small retail businesses in the Middle East 1. Economic restructuring 2. Intensified competition 3. Government regulation Porter's Five Forces Model Understanding the dynamics of the competitors in the industry helps assess the potential opportunities of every business venture by differentiating the similar products or services offered by the company against other business organizations. As such, it is necessary to realistically assess potential levels of profitability, opportunity and risk based on five key factors within an industry so as to determine the long-term profitability of a market or market segment. GT Current Business Strategy In analyzing the competitive strategies of GT, Porter's five forces will be used (Porter, 1980): Rivalry Rivalry is considered to be the strongest and most important force in Porter's model. It represents the presence and number of firms competing for each other's economic profits (Coombe, 1998). The level of rivalry within the Retail industry can be described as high. This is mainly due to the presence of several competing companies of similar sizes. Moreover, rivalry level increases because of product and service differentiation inadequacy (Dean and Gabilliet, 1996). As GT offers similar products, the level of competition is naturally increased. The companies operating within the industry are also very aggressive in making fresh moves so as to increase sales and market share. Entrants The threat on entrants is highly dependent on the presence of factors known as barriers of entry (Elsrud, 1999). Basically, barriers to entry could increase or decrease the chances of new businesses offering products that could rival those produced by existing companies. Naturally, the threat on entrants will be low due to risks of decreased market share potential (Hsiedh, 1996). There are several examples of barriers to entry. For the Vegetables and Fruit industry, the entrant factor can be considered as low due to a number of reasons. Buyers This aspect of Porter's five forces pertains to the power of the buyers over the manufacturer or the company (Kay, 1993). In the case of the Vegetables and Fruit industry, the buyer power is high. Due to the presence of several competitors, menu offered to consumers are undifferentiated (Meridor, 1995). The high level of substitutes gives the consumers much power to go and patronize other Vegetables and Fruit suppliers. Suppliers Similar to buyer power, the power of the suppliers with the company is high as well. This is because supplier concentration for menu ingredients is low. GT can deal with other suppliers for its production (Muris, Scheffman and Spiller, 1993). If the sales establishment is a multinational type, other suppliers will be very willing to supply goods to such company. However, major Vegetables and Fruit stores should also note that healthy relation with suppliers is as important as those with its customers. So as not to affect the quality of its products, it is imperative that the company refrain from changing one supplier to the next. Substitutes As mentioned, the Retail industry is very competitive; Vegetables and Fruit companies and distributors are operating in a business environment where several major companies are producing and offering similar products or services. In addition, the target markets of these companies are similar as well. The consumers then have several product options to choose from, making the level of substitutes high for this industry. GT Porter's Generic Strategies In order to reach its current business status, GT employed Porter's generic strategies. These strategies are cost leadership and product differentiation. These two strategies are actually introduced by Porter (1980) as the generic strategy. According to him, these two strategies are applied in all industries, which in turn lead to above average rates of return and competitive advantages. The cost leadership and differentiation strategies of GT were applied primarily to enhance their aims of expanding globally. For instance, GT applied cost leadership in its global operations by adjusting its product prices based on economic status of its foreign consumers (Howard, 1999). In order to integrate this strategy, GT opted to adjust the serving portions of its items. In its operations in some Middle East countries, serving sizes are usually smaller as compared to their western counterparts (Thompson et al, 2005). This strategy does not only help balance production costs with product prices, but it is also an effective means of attracting consumers who prefer smaller serving portions. The second type of strategy is Porter's Generic Strategies (Arnst and Edmondson, 1994). This strategy was developed by Michael Porter who argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus (Des and Davis, 1984, Dean and Gabilliet, 1996 and Dess and Davis, 1984). These strategies are applied at the business unit level. They are called generic strategies because they are not firm or industry dependent. The following table illustrates Porter's generic strategies: Target Scope Advantage Low Cost Product Uniqueness Broad (Industry Wide) Cost Leadership Strategy Differentiation Strategy Narrow (Market Segment) Focus Strategy (low cost) Focus Strategy (differentiation) (QuickMBA: Strategic Management, 1999-2003) Cost Leadership Strategy This generic strategy calls for being the low cost producer in an industry for a given level of quality. The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. The cost leadership strategy usually targets a broad market (Gailbrath and Schendel, 1993 and Elsrud, 1999). GT succeeded in cost leadership often has the following internal strengths: 1.) Access to the capital required making a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome.(Hill, 1988 and Fifield, 1998) 2.)Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process. 3.) High level of expertise in manufacturing process engineering. 4.) Efficient distribution channels. However, each generic strategy has its risks, including the low-cost strategy. For example, other firms may be able to lower their costs as well. As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage (Porter, 1985). Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share (Gailbrath and Schendel, 1983 and Hill, 1988). Competitive Advantage One of the core characteristics of a successful organization is focus (Hsieh, 1996). Since the business environments are fast becoming more and more complex added to the fact that it changes rapidly and dynamically, businesses need to concentrate on a few key elements that are most important to their organizations survival. Thus, it is not surprising the critical success factors keep the organizations from straying too far with external issues not relevant to their company's success (Hume, 1991). Critical success factors (CSFs) in business, are the limited number of areas in which results, if they are satisfactory can ensure that successful competitive advantage for the company (Thierauf, 2001). Determining these factors is an old concept in business because there were great leaders throughout history who have identified and addressed key factors to achieve their successes (Kay, 1993). There is no one definition of CSF but it is considered that these are the areas which the company needs to concentrate on to flourish. Therefore, the activities should be carefully monitored and guided by the management. Chung (1987) and Lipset (1991) defined critical success factors as managerial factors that create a competitive edge for a company in its respective industry. There is no specific process in identifying and executing critical success factors in strategic management planning. This is the reason why Thierauf (2001) asserts that different companies which have similar structure can conduct its market entry forming different strategies which lead to the development of various critical factors (Porter, 1980). As the primary means for an organization to achieve its strategy, critical success factors must take into account the differences in the environment and organization that exists. In the Vegetables and Fruits Industry, certain considerations are assessed and evaluated in order to ensure the success of business organizations (Meridor, 1995 and Roye and Towers. 2002). These include the (1) supply of and demand for vegetables and fruits, (2) quality and scarcity of the vegetables and fruits, (3) governing economic structure, and (4) technological explorations and processing. As such, determining the success of strategic business planning and implementation could only be realized by Argyle if these factors are recognized and addressed (Muris et. Al., 1993). The success of GT in the industry is greatly dictated by the diverse products it offers to the consumers (Coombe, 1998 and Porter, 1985). The company's control on the low-end diamond industry as the leading supplier of vegetables and fruits served competitive advantage evident in the demands made in the Middle East where GT was able to establish a strong customer-base. This also true in the case of the highly-prized vegetables and fruits whose production and distribution is solely controlled by GT as its contribution in the high-end market (Crouch, 1994). Quality and scarcity of the products and its high value served a significant factor in the active participation of the company in the vegetables and fruits industry as a whole. Conclusion It is always important to know the characteristics and nature of the products and services offered by any advertising campaign because this will guarantee the success of the marketing strategy. But knowing the product alone can be detrimental any marketing plan if the advertisers and the manufacturers themselves have no idea of the new target market they are trying to penetrate. The fact that there are really products and services that cannot be applied or utilized in a particular country should be a constant thought and reminder to the advertisers and business organization with plans of gaining entrance and share of clients and consumers. The services and products should be correctly classified as to whether they will be sellable in the new market. The lifestyle and daily routines of the people in the new target market should be likewise considered to ensure that the products and services offered will be able to enter the new market in a different locality. Conducting researches and market studies on the purchasing power and the consumer behavior of these people will benefit the business organization to conceptualize, transmit and channel the correct advertising message to the target. Hopefully this will eventually attract the interest of the target audience and gain their loyalty to the product or service being made available to them. The products or services should always be in synch with the tastes, lifestyle, economic status and purchasing power of the prospect foreign target market. If the contrary is the case, it may also worthy to consider the time frame in which the marketing strategy and advertising plan will be duly employed and utilized in a foreign locality with different cultural orientation. Time is also the factor to be considered in conceptualizing and contextualizing a product or service innovation as well as its launching or introduction in the market. The broadcasting networks especially that of the television and the radio media forms should be examined in great detail to make the local entrance of the products and services possible. The print medium should also be taken into consideration especially its distribution in a particular locality or country. Even though the concept of the strategy is a standardized advertising campaign, the people who will be responsible in executing the said project should be sensitive enough to investigate on the local environment. The same advertising campaign does not necessarily mean that the strategy, plans and approached that will be utilized is similar. Too much generalization about a locality and the people who will be the target of the campaign may post danger on the success of the project. It is important to get close to the audience by knowing their culture. Most of the successful business endeavors depend greatly on good interpersonal communication and relationship between the service or product providers and their clients. Gaining the trust of the clients and maintaining patrons is very important to ideal business transaction flows. But all these will be put to waste if issues and problems brought about by cultural differences between employers and employees arise in an organization functioning to achieve a common goal. The connection shared by the members of the organization, through their collective goals and objectives, makes them recognize their role not only within the organization but also to their people they have to serve. The application of organizational culture makes them understand the needs of these people and apply various systematic processes for efficient service and exemplary performance. The united insights of all employees at all levels of the organization enable them to welcome new ideas generating new approaches and new ways of processing things characterized with team members are open to take on challenges and are keen to break new ground. The economy and markets are different from those of a decade ago. 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